Freight rates ease as Opec cuts crude output

Opec is confident its output reductions will work and that oil prices will stabilise at about the $60 a barrel level. If the VLCC market is anything to go by, there is slightly less oil being moved as freight rates eased very gently downwards and then settled.

Where last week the rate from the Gulf to Northwest Europe was Worldscale 70, the fixture of the Younara Glory to Total at WS67.5 demonstrates the pattern. Cargo movements from the Gulf to such destinations as South Korea have been more affected. The previous week's WS75 has now fallen 10 points as the Front Highness was concluded at WS65 to GS Caltex.

Not only was the Opec move to blame for these reductions in oil movements. Europe has had one of its warmest Octobers on record.

A similar picture is seen in East Asia, where refinery runs have been cut in some parts.

Warmer temperatures in the region are curbing demand for heating oil, which keeps oil stocks at a higher level than normal.

This of course has a knock-on effect on crude demand for eastern destinations. Thus oil prices continue weak.

There was initially more VLCC demand in West Africa, firming rates. But the market is now quieter for cargoes to the Gulf of Mexico, where brokers have marked rates down to WS95, and to Asia, where rates have fallen to WS80.

Suezmax

The story is similar for Suezmax tonnage. Demand dropped in their prime trade of West Africa to the US, driving sharply down. After peaking at WS185 last week, the latest fixtures reported are close to WS120. In fact, Exxon and Valero are reported to have concluded three Suezmaxes from West Africa to the US Gulf at WS120. Voyages to Europe from West Africa have fallen as low as WS115.

In the Med, demand also fell, as rates dropped to WS125. In the Black Sea, there are two opposing pressures.

First, the pipeline feeding Supsa has been damaged and fewer cargoes are being quoted.

And weather in the Turkish Straits has deteriorated, with more freq-uent fogs causing delays of four to five days in both directions.

But rates have been weakening and the latest fixture is that of an undisclosed vessel to Turkey at WS125.

Aframax

Rates were also affected for smaller sizes in the Med as Aframax rates came under pressure. Having fallen last week from WS220 to WS155, the drops continued but bottomed out at WS135. In the Black Sea, Aframax rates followed the Suezmax trend and also fell slightly. The Ceram Sea was fixed from Novorossiysk to the Med at WS132.5.

Northern Europe also followed a weaker path, with rates for the usual 80,000-tonne parcels having been concluded at WS210. These have now eased back to WS170. In the Caribbean, demand continued at a high level, but rates eased back slightly from WS280 to WS255. The Rebecca was taken by Shell from east coast Mexico at that level for discharge in the Gulf of Mexico.

East of Suez there was less enquiry. In the Arabian Gulf, ISS fixed the Jag Lahma for 90,000 tonnes from Ras Tanura to Mangalore at WS120. Further east, rates have also come under downward pressure as high stock levels affected the fuel oil market. The Lofoten was fixed for Labuan to Daesan at WS145, down from a market rate of WS157.5 the week before.

In the clean sector, refiners have taken the opportunity to close some plants for routine maintenance before demand for heating oil takes off.

As a result, production and stock levels for clean products, notably petrol, have fallen.

This vacuum has attracted imports from the Caribbean and trans-Atlantic, but the tonnage supply appears to be more than adequate; rates fell slightly for both cargo movements. UK Continent/US East Coast eased back 15 points to WS210 while Caribbean/US fell 20 points to WS175.

In Asia, stock levels remain high in the Asia Pacific region. This has affected rates for LR2s, LR1s and MRs.

For 30,000 tonnes Southeast Asia/Japan, the current rate has fallen 20 points to WS260. Cargoes of 55,000 tonnes from the Arabian Gulf to Japan have been concluded at WS150, down 25 points. The larger LR2-size parcels have fallen by the same amount to WS130 to WS135.

This time last year, rates were up above WS400, as the Americans were picking up the pieces after their hurricane season and product imports were running at record levels, which then had an impact on clean rates worldwide.

The writer is a shipbroker and marine consultant with more than 40 years of experience in the tanker and dry cargo markets.